Construction activity boosts economic growth to 3.9%pa in March 2018

New Zealand’s economic outlook is changing. Infometrics released its comprehensive July 2016 economic, building, and transport forecasts on Friday 22 July, which paints a sunny picture for the next few years, but a serious hangover thereafter.

The key upshots for New Zealand’s economic outlook over the medium-term are as follows:

Construction will be the driving force behind economic activity, especially in the next 2.5 years, when it will add a whopping 2.9 percentage points to economic growth.

The lift in construction will be largely the result of rising residential building activity. New dwelling consents are expected to hit an unprecedented high of 40,044 consents in the year to June 2018.

Strong economic growth conditions will also drive demand for passenger cars and new light commercial vehicles even further upwards, despite sales already being very high. New light truck sales are expected to climb above 40,000pa in the year to June 2018.

Annual net migration, although expected to ease, is anticipated to remain above 22,000 people for the duration of our five-year forecast, averaging over 50,000pa for the next two years.

With the Reserve Bank pursuing house price stability more aggressively through tighter mortgage lending requirements, we anticipate monetary policy settings to become more responsive to the lack of consumer price inflation. The Bank will shave another 25 basis points off the official cash rate in August and maintain a 2.0% cash rate through until early 2018.

Infometrics’ regular and comprehensive economic, building, and transport forecasts are made available to clients on a subscription basis. Current forecast subscribers can access our latest forecasts via our portal . If you are not a subscription client and would like more information, please contact us on (04) 909 7612 or at economics@infometrics.co.nz, or via our website.

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